In this briefing:
- Non-Performing Loans in China
- Sea Ltd Placement – Capitalizing on Momentum
- ’Fake News’ Threatens China’s Rally
- Shenwan Hongyuan (申万宏源) A+H: A Commoditized Broker Business
- HK Connect Discovery – February Snapshot (Tencent, COFCO Meat)
1. Non-Performing Loans in China
We have all seen the think-pieces in western media talking about China’s economic slowdown. Much of content that western audiences understandably focus on is the effect the trade war has on the downturn. However, we ran across a piece of data entirely driven by China that gives us pause. The amount of non-performing loans has only continued to increase. Yet, according to a trusted source 2 trillion RMB has been shifted off of the books in China. This tells us that China cannot do enough to get rid of NPLs.
2. Sea Ltd Placement – Capitalizing on Momentum
Sea Ltd (SE US) is looking to raise about US$1.2bn in its upcoming placement. It will be larger than its IPO in 2017, which raised about US$880m.
The deal scores well on our framework owing to decent valuation, strong price and earnings momentum but had little track record for comparison. The company announced a strong set of FY2018/Q4 2018 results which had beaten estimates.
Even though, the deal size is large, representing 23.2 days of three-month ADV, there is enough time between the announcement to the end of the bookbuild to price in the impact of the placement.
3. ’Fake News’ Threatens China’s Rally
- Widely held view that Chinese eased ‘massively’ in January 2019 – it did NOT
- According to latest daily Open Market Operations little change through February
- Liquidity matters hugely (China contributes around one-fifth of Global Liquidity)
- We still expect PBoC easing over coming weeks and continue to favour Chinese markets
4. Shenwan Hongyuan (申万宏源) A+H: A Commoditized Broker Business
Shenwan Hongyuan filed in November to list in Hong Kong. It is a leading brokerage house in China. With an A-share market capitalization of USD 18 billion, the company plans to issue up to 20% of its shares for an A+H listing. In this insight, we will discuss:
- Company’s history.
- Comparison with leading Chinese brokers.
- Our thoughts on valuation.
5. HK Connect Discovery – February Snapshot (Tencent, COFCO Meat)
This is a monthly version of our HK Connect Weekly note, in which I highlight Hong Kong-listed companies leading the southbound flow weekly. Over the past month, we have seen the outflow continue from January. In February, we have seen Chinese investors were selling Tencent in February after buying Tencent in January. Chinese investors were also buying domestic automotive manufacturers and Macau gaming sectors.
Our February Coverage of Hong Kong Connect southbound flow
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